International Monetary Fund (IMF) managing director Kristalina Georgieva urged ASEAN leaders to invest in international cooperation as well as growth-enhancing reforms to fully recover and continue on the pre-pandemic path to prosperity amid a global economic slowdown.
Georgieva said the world economy has shown resilience to a string of negative shocks, such as the pandemic, war, climate events and a cost-of-living crisis, and the recovery from these shocks continues.
“But it is slow and uneven. Trillions of dollars of global output have been lost compared to global pre-pandemic trends,” she said at the plenary session of 43rd ASEAN Summit in Jakarta, Indonesia on September 5.
She pointed out that compared to some major economies, only the US has fully recovered. “The Eurozone is still around two per cent below trend, while China and other emerging market and developing economies are around five per cent below trend, with low-income countries hit even harder.”
Meanwhile, ASEAN remains resilient to external factors with the IMF projecting growth of about 4.5 per cent this year and next.
Georgieva said ASEAN countries are contributing 10 per cent to global growth, which is “more than twice their weight” in the global economy, noting that this was a reflection of the past reforms undertaken by policymakers.
But, as a region of “highly integrated economies”, ASEAN is experiencing significant scarring from the supply chain disruptions and low external demand arising from global shocks.
The average growth in the last three years was only half of the pre-pandemic projections, generating output losses of around eight per cent of gross domestic product, well above the global average.
“ASEAN needs even stronger growth to fully recover and continue on the pre-pandemic path to prosperity. This is not an easy task. Economic fragmentation makes it even harder.
“If the world were to break into separate economic blocs, this would have profound implications for dynamic open economies such as ASEAN. It is thus imperative that we work together to combat this threat,” she said.
She recommended that policy makers focus on two overarching priorities.
“First, invest in international cooperation. This means pushing back against the forces of fragmentation. ASEAN can be an example and an advocate for the benefits of cooperation and you can count on the IMF as your partner in supporting these efforts with our near-universal membership.
“Second, invest in growth-enhancing reforms. In an environment with weak medium-term growth prospects, domestic reforms are essential. This means investing in health, education and the digital infrastructure – it is vital to ensure that new technologies work for your people, not against them.
“Pursue sound economic policies to build buffers against shocks and maintain economic and financial stability, and make further progress on the climate and energy transitions, including by boosting green finance and incentivising the private sector to play its part,” Georgieva advised.
On Sept 4, Prime Minister Hun Manet said it is imperative that the ASEAN Economic Integration strengthened and deepened to further narrow the development gap within ASEAN, so as to achieve common prosperity.
Speaking at the ASEAN Business and Investment Summit (ABIS) 2023 in Jakarta, Indonesia, he said the promotion of intra-ASEAN trade and investment, in particular, should be meaningful and not leave anyone behind.
“To realise this vision, ASEAN must strive in a concerted effort to secure a timely conclusion of a better, forward-looking, and more practical ASEAN Trade in Goods Agreement upgrade,” Manet added.
Equally important, he stressed, ASEAN should fully and effectively utilise the Regional Comprehensive Economic Partnership Agreement (RCEP).
In that, existing ASEAN free trade agreements and economic cooperation with ASEAN dialogue partners are “still of critical importance and relevant for businesses and investors”.
At the same time, he said ASEAN should take full advantage of the change in economic architecture to become more resilient, by accelerating inclusive ASEAN digital transformation and enhancing the participation of micro, small and medium enterprises in the regional and global supply chains.